Foreign M & A Pricing Problems Of State-owned Enterprises

This dissertation will investigate the asset pricing in cross-border M&A in China for state-owned enterprises. The asset pricing problems went with the very beginning of the cross-border M&A. Furthermore, some cases promote the development of policies and laws related with cross-border M&A. As for given case, the industry and academician haven't had agreement on pricing result. However, we couldn't find a suitable pricing model for state-owned enterprises. To settle this problem and end the dispute on deal prices, this research will analyze the cross-border M&A in China thoroughly and provide pricing models for cross-border M&A of this stage based on the characters of China's economy. Therefore, the approaches and research outcomes have both theoretical meanings and realism meanings.To build our pricing models, we start with the popular models. On the one hand, we discuss the pricing rules and method in practical and then summarize the advantages, weaknesses and application conditions theoretically. On the other hand, we find the problems of these pricing models according to the deep analyses. With the understanding of China economy and economic transition, our opinion is that we had great uncertainties in this stage in China from the macro-economy and development of some industries. At the same time, with the deepening of market-oriented economy reform, many more resources will be priced with market ways. But the practical approaches are usually come from planned economy and couldn't show the market value. Basically, these are also uncertainties. So we think that these pricing rules could miss the evaluation of uncertainty. In some cases, the uncertainties are of great value. Theoretically, these uncertainties are options for foreign buyers. So these valuation methods will undervalue the state-owned enterprises. We hope that we can introduce a model with tools pricing these uncertainties. Naturally, the real option model turn to be our choice and the expanded NPV model with real option model is the main model in our research.We classify foreign acquirers into two types including strategic investors and financial investors according to the M&A character and then we conclude their options of different investors. After that, we pick up the best real option models for these options. For strategic investors, we are confident with that they pay more attention to the operational choices including expansion, shrinkage and asset sales. For the other one, the financial system reform will offer the investors more liquidity. Their shares will possibly be negotiable in secondary market after the deal. With these analytical results, we build two models. After some necessary assumptions, we link the model parameter to the financial data or price data.In empirical part, we employ case analysis rather than the simulation calculus in similar researches. We choose two cross-border M&A cases for two models. After the evaluation, the dissertation shed some lights on the factors affecting the value of these state-owned enterprises and discusses the difference between the tender price and theoretical value.The asset value depends on the system environment and we give our summaries on these factors related with value. Though we can tell whether the state-owned enterprises are underpriced in cross-border M&A based on the empirical results. But these values are partly from these investors especially for strategic investors. What's more, we couldn't calculate these values. So the difference between deal price and model result can't answer the above problem. With the same logic, we also couldn't make our point with the pure market performance after cross-border M&A.One of our research results is that the market systems of cross-border M&A are key elements causing the undervaluation problem. We give a deep investigation on this topic from dealing rules to bargaining power of two sides. Our findings are that several factors have impacts on cross-border M&A market at present.Corresponding to the research results, we bring our policy suggestions mainly focusing on pricing rules and cross-border M&A market system. On the one hand, we need to introduce more flexible pricing methods for evaluation of cross-border M&A. On the other hand, we need to design more rational market system to push the development of cross-border M&A market. These need cooperation with different system reforms. So we shouldn't expect them to finish in the near future.